Relevant and even prescient commentary on news, politics and the economy.

IS TREND PAYROLL EMPLOYMENT REALLY WEAK?

For seven years from 2012 to 2018 the monthly payroll employment showed a solid trend of around 200,000 gains each and every month.  If it was much above or below this trend, analysts found some excuse to explain the difference and expected the off-trend observation to be quickly reversed.  So far this year most analysts continued to act as if this pattern was being repeated.

However, in August the Bureau of labor Statistics (BLS) rebenchmarked the data to more recent Census data. They announced that it would lower reported employment growth but they did not release the revised data until the August employment report last Friday.  The new data shows that 2019 payroll employment was significantly weaker than originally reported. The January monthly increase was still around the old 200,000 trend.  But in the seven months from February, 2019 to August,2019 the average monthly gain was only 123,000, roughly 60% of the old trend. Moreover, the 12 month moving average fell from 225,000 in January to 165,000 in August and every observation from February to August was below the still declining  12 month moving average.

Seven consecutive months should be enough to clearly demonstrate that trend payroll employment growth has fallen to a new, significantly lower trend than the old 200,000 trend.

 

Figure 1

 

Analysts tend to focus on the month over month change so it was understandable that they did not notice that the revised data was showing much more weakness than the old data. Remember,guessing monthly economic releases was a game created by the brokerage house, especially the bond houses, to generate volume because their earnings was much more sensitive to volume changes than other variables.

 

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Weekly Indicators for September 2 – 6 at Seeking Alpha

by New Deal democrat

Weekly Indicators for September 2 – 6 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The nowcast and the long term forecast have been pretty stable, but the short term forecast has been volatile recently – and the monthly series (slightly negative) vs. the weekly data (more positive) are not in sync.

This is likely because there is much more monthly data (usually from the government) than weekly data (more often from private sources) about manufacturing.

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Is Doing Environmental Economics Especially Depressing?

Is Doing Environmental Economics Especially Depressing?

We have now learned that on Aug. 27 last week Matin Weitzman hanged himself, leaving a note citing his failure to share in last year’s Nobel Prize as well as his apparently declining mental acuity.  That prize he did not share included William Nordhaus as a recipient for his work on climate economics issues, a topic that Weitzman also worked on, arguably more deeply and originally than did Nordhaus.

Last April Alan Krueger also committed suicide, although we have to this day not learned either how it was done or if he left any notes or if somehow it is otherwise known why he did it, with the only hint of any trouble being that he suddenly stopped tweeting in January, which he had previously done daily.  He is better known for his work on minimum wages with David Card and worked on many topics.  But among his topics was also environmental economics, with he and Gene Grossman publishing an influential paper on the Environmental Kuznets Curve in 1994, although it is nnot fully known that it was actually discovered by Thomas Selden and Song Daqing from looking at data on SO2 emissions by country.  So he was also involved in environmental economics.

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August jobs report: for once, the underwhelming headline masked very good internals

August jobs report: for once, the underwhelming headline masked very good internals


HEADLINES:
  • +130,000 jobs added (+105,000 ex-Census)
  • U3 unemployment rate unchanged at 3.7%
  • U6 underemployment rate rose 0.2% to 7.2%

Leading employment indicators of a slowdown or recession

 
I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive.

  • the average manufacturing workweek rose +0.2 from 40.4 hours to 40.6 hours. This is one of the 10 components of the LEI and is positive (note last month was -0.3 so on net this is still -0.1 hours from two months ago).
  • Manufacturing jobs rose by 3,000. YoY manufacturing is up 138,000, a deceleration from last summer’s pace.
  • construction jobs rose by 14,000. YoY construction jobs are up 177,000, also a deceleration from last summer. Residential construction jobs, which are even more leading, rose by 7,000.
  • temporary jobs rose by 15,400 (note this *may* reflect census hiring).
  • the number of people unemployed for 5 weeks or less rose by 6,000 from 2,201,000 to 2,207,000. The post-recession low was four months ago.

Wages and participation rates

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Is Inflation a Global Phenomenon?

by Joseph Joyce

Is Inflation a Global Phenomenon?

The persistence of inflation at relatively low rates despite years of monetary stimulus has led to wide-ranging investigations into its determinants. Traditionally the rate of inflation has been linked via a Phillips curve relationship to domestic factors, such as slack in the labor market. But is there also a global element?

Maurice Obstfeld, who has returned to UC-Berkeley from his post as chief economist at the International Monetary Field, examines some of the mechanisms by which global factors could affect U.S. inflation in a new National Bureau of Economic Research working paper, “Global Dimensions of U.S. Monetary Policy.” He reviews the evidence on the Phillips curve, and reports that there is little evidence that globalization has had a direct impact on the response of wages to unemployment. An indirect linkage, however, may exist through labor’s lower share of GDP, which could respond to foreign factors such as global supply chains. There may also be a relationship through the correlation of import prices and Consumer Price Index (CPI) inflation.

Another mechanism is based in the linkages of U.S. financial markets with those abroad. If these markets are integrated, then the natural rate of interest (r*) depends on foreign savings and investment as well as the domestic counterparts. An increase in foreign savings will lower the global r* which will stimulate domestic spending. Former Federal Reserve Board Chair Ben Bernanke claimed that this effect the cause of the housing boom in the U.S. that led to the global financial crisis.

 

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Two sharply contrasting reports on the economy to start September

Two sharply contrasting reports on the economy to start September

We got two contrasting views of the economy this morning. (Tuesday)

First, the good news: residential construction spending increased in July. Below I show it in comparison with single family permits:

Typically construction follows permits. In the past few years, it has been almost coincident with permits. This is more good news for the important and leading housing sector, indicating that the decline that started in early 2018 has ended. With the continued recent further decline in mortgage rates, I expect further advances, although possibly not strong.

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A note on Arctic sea ice

Figure 1

Via mashable:

Alaska’s exceptional summer continues.

The most rapidly changing state in the U.S. has no sea ice within some 150 miles of its shores, according to high-resolution sea ice analysis from the National Weather Service. The big picture is clear: After an Arctic summer with well above-average temperatureswarmer seas, and a historic July heat wave, sea ice has vanished in Alaskan waters.

“Alaska waters are ice free,” said Rick Thoman, a climate specialist at the Alaska Center for Climate Assessment and Policy.

“This is definitely an extreme year — even by more recent standards in a changed Arctic,” noted Walt Walt Meier, a senior research scientist at the National Snow and Ice Data Center.

In the continually warming Arctic, sea ice has completely melted around the Alaskan coast before, notably during 2017’s melt season, but never this early. “It’s cleared earlier than it has in any other year,” said Thoman. (Sea ice starts regrowing again in the fall, when temperatures drop.)

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A Striking Fact Reported in the August 28 2019 Quinnipiac Poll

Voters who are paying a lot of attention to the race are much more to support Elisabeth Warren than voters who are paying little or no attention. It is also true that voters who are paying a lot of attention are more likely to support Joe Biden than Elisabeth Warren. Finally, Voters who are paying a lot of attention are somewhat less likely to support Bernie Sanders than are voters who are paying little or none.

If you don’t see an image cut and pasted from Quinnipiac click on the “Read More >” link at the bottom right corner of the post to see the image of the polling results.

The whole pdf report of the results is here

6% of people who are paying little or no attention support Warren and 25% of people who are paying a lot of attention support Warren. In contrast the numbers are almost identical for Biden who has 31% among those paying little or no attention and 32% support among those paying a lot of attention. Finally Sanders has 18 % support among those paying little or no attention and 11% support among those paying a lot of attention.

I think this is interesting. For one thing, people pay increasing attention as time passes. This helps explain the striking increase in overall support for Warren. I would tend to suspect that support for Warren will continue to increase.

But it might just show that nerds like nerds, that people who claim they have paid a lot of attention like the candidate who always has a plan for that. If this explains the pattern, there is less reason to forecast continued increase of support for Warren. People pay more attention to elections as the voting day approaches, but non nerds do not become nerds.

Anyway, I thought the polling data is interesting.

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Does O’Rourke Have The Trade Strategy For Dems Against Trump?

Does O’Rourke Have The Trade Strategy For Dems Against Trump?

I have been posting here periodically on how it seems that the Dems do not seem to have a strong or well-defined position about Trump’s trade wars that seem politically effective or even coherent.  The few candidates who have made noise about essentially returning to Obama’s policy, e.g. Hickenlooper, have done so poorly they are dropping out or at least not in the 10 making the next debate stage.

We then have those who think what is called for is being “tougher than Trump on trade,” with Bernie Sanders literally saying that.  Warren has a more nuanced version of that, but which amounts to calling for renegotiating essentially all US trade agreements to make them more labor and environmentally friendly.  Maybe on the eve of Labor Day I should jump up and  down for that, but frankly, it looks about as wise as Cory Booker joining Trump in calling for the JCPOA Iran nuclear deal to be renegotiated, in other words, not so wise although it make look good as a campaign slogan.

Most of the others seem to be avoiding the topic, apparently aware that different groups in the Dem party have quite different views about this.  It is not an easy issue, although increasingly it looks like one where Trump is becoming increasingly unpopular, with this likely to get very serious if the economy seriously slows down with Trump’s trade wars getting a lot of the blame.

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